Q3 2021 Rimini Street Inc Earnings Call
Welcome to the remaining Street quarterly earnings call. My name is <unk> and I'll be the operator for todays call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
During the Q&A session. If you'll have a question. Please press Star then one on your Touchtone phone I will now turn the call over to Dean Paul Vice President of Investor Relations. Mister poll, you may begin.
Thank you operator, I'd like to welcome everyone to Reminisce Street third quarter of 2021 earnings Conference call.
A call with me today, that's Rubin R. C E O and Michael Prieto R C up though.
Cause they were just use our earnings press release for the third quarter ended September 30th 2021.
A copy of which can be found on our website under investor Relations. A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in the press release.
An explanation of these measures the why we believe they're meaningful is also included in the press release under the heading about non-GAAP financial measures and certain key metrics.
As a reminder, today's discussion will include forward looking statements that reflect our current outlook. These forward looking statements are subject to risks and uncertainties that may cause the actual results to differ materially from statements made today.
We encourage you to review our most recent SEC filings, including a Form 10-Q for the third quarter of 2021 for discussion of risks that may affect our future results or stock price.
Before taking questions will begin with prepared remarks with that I'd like to turn the call over to stuff.
Thank you Dean and thank you everyone for joining us today.
For the third quarter, we achieved record revenue of 95.6 million.
15.9% year over year, and it's the high end of our guidance range and achieved a strong revenue retention rate of 93% up from 92% last year on subscription revenue.
Subscription revenue accounted for 98.4% of our total revenue.
More granularly, we achieved 31.4% international and 4.8% U S revenue growth year over year.
We see growing demand for romine streets, expanding portfolio of enterprise software support solutions as we continue building and maturing or go to market capability to launch sell and deliver our whole solutions portfolio to do an existing clients globally and prepare the company for billion dollar.
You will revenue operations by 2026.
For the third quarter, we also expanded our gross margin improved our cost leverage and completed significant capital market transactions and materially reduced both of our cost of capital and potential dilution.
Michael will further detail those transactions and his prepared remarks.
From the company's inception in 2005, the day, we have signed more than 4400 clients, including over 180 Fortune 500, and global 100 companies and added a net of 148, new clients in the third quarter.
To date, we have saved our clients more than $5 billion.
During the third quarter, our global service delivery team closed over 9500 to four cases and delivered more than 18000 tax legal and regulatory updates across 27 countries and achieved an average client satisfaction rating Ah more than 4.9 out of five.
<unk> on the company support delivery and for the first time, an average satisfaction rating of 4.9 out of 5.0 on the company's client Onboarding program.
Where 5.0 is excellent.
Our global employee count as of September 30th 2021 was 1595, a year over year increase of 15.2%.
Pandemic.
We believe we have navigated the pandemic well today and despite continuing risks of Covid variance, we're taking steps to return to some office operations at 10 select marketing event and increase in person sales activity.
However, despite continued success with the global vaccination roll out the more infectious Covid Delta very and continues to create differing levels of business disruption around the world.
And it is clear the global pandemic will likely continue to create both opportunities and challenges for businesses through 2022.
The full extent to which the pandemic will continue to affect our business and the remainder of 2021 and beyond will depend on numerous evolving factors that we cannot reliably predict.
Sales execution.
During the third quarter, we closed hundreds of transactions with strategic local and global brands across diverse industries and markets.
Sales transaction spanned the wider breath of our solutions portfolio, including support M. S security interoperability monitoring and professional services.
We also continued to see growing momentum and cross sales to existing clients, where we believe that this time, there's over $1 billion in annual white space sales opportunity.
With respect to the renewal an extension of existing subscription agreement. We achieve continued success with many clients extending their contracts for more than one year and some green to prepay more than one euro fees in advance for a small fee discounts.
We continue our focus on launching selling and supporting our expanded solutions portfolio globally.
Executing go to market activities that includes significant recruiting and hiring of a broad range of leadership positions in our global marketing and sales organization that need to be filled out in order to drive improved sales execution of productivity.
In fact, several new leaders in revenue support organizations were announced and press releases issued over the last few days and.
Including the Chief Technology Officer in office of the G. T O G.
Chief Products Officer Theater G M North America Regional G M. North America East G. M. S. P services G M Oracle services and G M Global professional services.
Ah relatively new sales reps in sales support staff those with less than one year experience Ah ramping up and gaining valuable experience that should benefit the company the coming periods.
Today more than half our sellers and many sales management have less than one year of experience in their roles and we still have many key sales and marketing leadership positions to fill.
Like all companies today, we are competing for talent in the challenging recruiting environment.
The combination of these factors has caused some lumpiness in hiring and sales execution.
Or go to market strategy continues to evolve around an industry in solution sales model that leverages are bundled service offerings for easier client sale.
This strategy is being successfully implemented by a theater in regional G. M leadership model now in place globally and enabled by or you go to market teams structures and the new integrated team compensation plans, we've put in place earlier in 2021.
Romine Street already serves many of the largest logos across different industry and we believe focusing on the specific needs of each industry will allow us to further penetrate the T M in each industry with the breath of our expanded solution portfolio.
New product offering.
During the third quarter, we launched services for open source databases, which are now handling a substantial and growing portion of the global database workload.
Clients, one a migraine some of their database workloads to open source platforms in order to optimize cost and operational flexibility.
Our clients have asked us to extend our award winning enterprise class services to the most popular open source database platforms. They want to leverage my sequel, Maria DB Postgrad sequel, and Mongodb.
<unk> solutions are in addition to the proprietary databases, we already support globally.
Oracle I.
B M D. B, two Microsoft sequel server and S. P Sybase, Max D B and Hannah.
Romania Street is already signed open source database service contracts appointment and we already have more than 400 engineers globally with database skills and experience.
We also know offer database migration advisory in full migration services to help organization smoothly and methodically replatform their enterprise workloads across proprietary and open source database platforms.
Tiny case studies.
To highlight how clients are leveraging romine Street services globally to achieve their strategic goals across different industries I'd like to share a few case studies from the third quarter.
First T mobile with more than $868 billion in annual revenue no no for 104 million customers.
T mobile has been leveraging Romine Street support since 2019 for their S. P system, including support for the organizations extensive software customization, which we're not covered under the software vendors more expensive annual support.
T mobile a S. A P platform.
Platform is comprised of more than 200 S. A P modules is used as the system of record for chief financial and operational functions and is a critical component of T mobile supply chain portfolio a.
A vital part of T mobile customer experience.
Since making the switch from vendor support to Rimini Street.
The bubble has been able to avoid a costly and unnecessary enterprise software migration project and instead has been able to redirect budget and resources to focus on delivering services and technology aimed at the lighting its customers as a competitive differentiator.
Eric Laval senior director of T mobile product and technology for supply chain stated that.
T mobile is a very complex environment. When we looked at the services, we were getting from S. A P versus the value of new functionality offered it became very clear that moving to Rimini Street support offered a more compelling alternative for us.
Throughout our engagement with the company they have had the right team in the right place at the right time.
The initial transition procedures improvements support model ensured a smooth startup.
Everything they did focused on ensuring a transition to a working model that hit the ground running.
Only Rimini Street provides the breadth and depth of experience scalable support infrastructure and advanced technology and processes BB do enhance business continuity and mitigation of financial and operational exposure for an organization of our size and scale.
Romine Street does a great job of balancing between tactical delivery and being a strategic partner.
We have great conversations on a regular basis about the future of the technology, the best way to approach our future I T roadmap and how we can balance between our internal delivery and the services Romine Street provides to advance our team along with the technology.
Romine Street is one of our most trusted partners.
Next Korean airlines, whose team has been concerned with the high cost low efficiency dynamic that it was experienced with the oracles maintenance and support and who recently moved the remainder of its own work with software to Rimini Street support.
Taking into consideration the successful partnership Korean Air had already been experiencing with the Rimini Street for their Siebel software support the I T team ultimately decided to move the rest of the Oracle Enterprise software landscape now hosted on AWS in the cloud to Rimini Street and <unk>.
<unk> the same ultra responsive seamless support they've been enjoying for the last two years with our initial service contracts.
Some neon Park ERP team later in Korean Air's I T Department stated that.
The cost of maintaining the rest of our Oracle software and databases with the vendor still accounted for a large portion of variety budget, but with romine streets rapid response and proactive problem solving approach. We now have a more agile partner supporting the stable operation of our mission critical enterprise soft.
We're in the cloud.
All under a single roof.
This move has provided us with even more efficiencies that'd be we're experiencing previously and it is freed up the theme to focus on other more pressing business projects.
Lastly.
Origin energy.
A leading Australia and energy company with 4.3 million customer accounts and a vast oracle footprint that includes ERP system environments for retail customer billing financial accounting asset management running on more than 100 Oracle database instances.
Origin switched to Rimini Street support for its Oracle software, including E business Suite, Oracle database fusion middleware and high Parian.
Cameron Adams head of architecture and database services stated that.
We identified that one of our largest database opex cost was our maintenance and support.
You were attracted to the value proposition and support model offered by Romine Street as the company gave US an avenue to materially reduce our database costs and avoid further upgrades in the future.
In addition, we have been on a journey in recent years of migrating all of our application workloads to the cloud.
Working with Romine Street has helped US further simplify some of our activities and are a ministry just become a valuable component in our overall strategy.
Oracle litigation update.
Remaining street versus Oracle the case, Romania Street filed against Oracle in 2014 remains in the pre trial stage trial is currently expected to proceed in the second half of 2022 or later.
With respect to the dispute the parties are currently engaged in over a permanent injunction that has been in place since 2018. The court held a hearing in September 2021 on this order to show odds.
Oracle alleges that Romine Street is violated the injunction that should be held in contempt and Romine Street believes that it has been a substantial compliance with the permanent injunction.
We believe that during the hearing Oracle failed to prove its claims and that court should mischarges order to show cause. We currently expect the findings by the court in the coming months.
Please see our disclosure in the third quarter 10-Q filing for additional information on the Orca litigation that has been ongoing since 2010.
Summary.
We continue working to complete our transformation and scaling project to support billion dollar annual revenue operations by 2026.
Focusing on sales execution and productivity exercising disciplined cash generation in management, and bringing our litigation with Oracle to a successful conclusion.
Now with that over to you Michael.
Thank you set and good afternoon, everyone.
Q3 2021 results.
For the third quarter, we delivered and expanded gross margin a higher year over your operating income non-GAAP operating income and ended the quarter with more than $103 million in cash.
Additionally.
During the quarter, we completed significant capital market transactions on.
On July 20th 2021, we redeem the remaining series a preferred stock with a five year term loan transaction financed by two commercial banks capital one and fifth third for 90 million at a rate of LIBOR plus 1.75% to 2.5%.
The company has taken certain one time cash and non-cash charges in the third quarter related to the closing of the financing transaction and the go for Daniel financing costs have been reduced by 24 million compared to fiscal year 2020.
As Jeff noted for the third quarter revenue was 95.6 million a year over year increase of 15.9% at the high end of our guidance range.
Annualized recurring revenue was $377 million a year over year increase of 15.3%.
Revenue retention rate for service subscriptions, which makes up 98.4% of our revenue was 93% with more than 80% of subscription revenue noncancelable for at least 12 months on a rolling basis.
On a cash flow basis, while we did he use cash in the period in line with our normal cycle cash it generated in the first half of the year and utilized in the second half of the year, we still ended the quarter with a healthy $103 million in cash.
For the third quarter clients within the United States represented 53% of total revenue while international clients contributed 47% representing aggregate year over year revenue growth rates of 4.8% for the United States and 31.4% for international clients.
Billings for the third quarter, where $73.7 million compared to $68.3 million for the prior year third quarter, a year over year increase of 7.9% that included billings growth in the U S and international markets.
Included in the quarter billings are multiyear prepayments for both renewals and for new client and voicing.
Typically clients pay for service upfront for the current service here, while multiyear prepayments represent clients, who pay upfront for multiple years of support. These additional invoiced amounts are positive indicator of the value being received by clients future client retention and the lifetime value.
Gross margin was 65.1% for the third quarter compared to 61.2% for the prior year third quarter.
While we continue to methodically expand gross margin through our scaling initiatives technology and other deficiencies and are now raising our full year gross margin guidance from 61% to 62% to be in the range of 61.5% to 62.5% the gross margin for.
The third quarter was elevated in part by some delays in hiring as previously described by Sir We plan to continue investing in the global service delivery capabilities for our new products services and solutions to ensure we can deliver our best in class offerings with unparalleled client satisfaction.
Operating expenses.
As a result of the overall business climate impacting all entities globally irrespective of industry, we are experiencing some cost pressures due to labor shortages and inflation.
We are mitigating these challenges in part by broadening our hiring practices with an emphasis to recruit more positions and lower costs geographies.
We plan to continue exploring all options available to ensure we are able to acquire the right talent at the right cost to continue our growth trajectory.
Sales and marketing expenses as a percentage of revenue worth 34% for the third quarter compared to 35.4% for the prior year third quarter.
The year over year reduction as a percentage of revenue is in part a result of timing of certain program implementation and hiring.
We remain focused on making the appropriate investments needed to support our growth initiatives and continue to expect full year 2021 sales and marketing expenses to be in the range of 35% to 36%.
General and administrative expenses as a percentage of revenue excluding outside of litigation costs was 16.3% for the third quarter compared to 15.8% for the prior year third quarter, but as per our guidance down significantly from the 18% in the previous call.
Sure.
Given that G&A spend during the first half of 2021 was higher due primarily to one time employee restructuring expenditures costs related to capital markets activities in certain legal expenses, we see the full you're closer to the high end of our guidance range of 16% to 17%.
Accordingly, we expect Q4 G&A spend will again continue to decline as a percentage of overall revenue sequentially from Q3, Thank you too.
Net outside litigation expense was 6.6 million for the third quarter compared to $3.8 million for the prior year third quarter.
The increase relates to cost associated with the evidentiary hearing <unk> discussed earlier on this call.
Or outside of litigation spend is not linear and can fluctuate each quarter based on timing of litigation activities.
We expect outside litigation expense to be in the range of 15 to 17 million for the full year 2021.
A just did EBITDA was $15.9 million or 16.7% of revenue for the third quarter also I would like to highlight are non-GAAP operating margin, which excludes outside litigation spin of 17.3% that underscores the significant profitability.
<unk> and substantial leverage to our operating model such that we remain confident in our ability to achieve our long term target of operating margins in excess of 20%.
Warrant treatment.
We realized that non-cash loss of $2.1 million during the third quarter relating to the 6.1 million private warrants with an exercise price of $11.50 that expire on October 10th 2022.
There is no scenario or provision that would lead to a cash settlement of this non-cash liability, which now stands at 5.1 million.
Therefore at the point when the warrants are retired we expect to realize a non-cash gain or profit and loss statement to extinguish this liability. Please.
Please see the third quarter 10-Q filed today for more information.
Balance sheet.
We ended the third quarter with a cash balance of $103 million compared to $83 million for the third quarter, a year ago up 24% year over year to.
Deferred revenue as of September 30th 2021 was approximately 244 million up 90.
<unk>, 19% from $204 million in the prior year third quarter.
Backlog, which includes the sum of build deferred revenue to noncancelable future revenue was approximately 553 million as of September 30th 2021 up 10% from $503 million from the prior year third quarter.
Capital market events.
On July 20th 2021, we completed the buyback of $87.8 million face value of series, a preferred stock plus dividends payable of approximately.
0.6 million, thereby redeeming and retiring all remaining series a preferred stock.
The transaction was funded by lenders capital, one and fifth third bank for a total of $90 million at a rate of LIBOR plus 1.75% to 2.5%. Accordingly go forward annual financing costs have been reduced by $24 million compared to fiscal year 2020.
Additionally, we have eliminated the potential dilution from conversion of the preferred to common stock by 15.5 million shares during calendar year 2021, moving forward. We will continue our methodical focus on increasing free cash flow generation and improved profitability for the benefit of Chai.
Holders, while assessing potential future capital return options.
Business outlook.
We are currently providing fourth quarter of 2021 revenue guidance to be in the range of 95.8 million to 96.8 million and accordingly, narrowing our full year 2021 revenue guidance to the range of $371 million to 372 million.
This concludes our prepared remarks, operator will now take questions.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound sign or the <unk>. If you are using a speakerphone you may need to pick up the.
Handset first before pressing the numbers once again, if you have a question. Please press Star then one on your Touchtone phone.
And at first question is Derek would Mister would go ahead.
Oh, Thanks for taking my questions. So on guidance, just very surprised to see that the two four guide of nearly.
Nearly flat on the sequential basis, it and <unk> and what's historically, a very strong sequential quarter and at a pretty big slowdown in year over your grad. So can you walk us through what has changed over the last three months, that's caused such kind of a dramatic different picture for Q4 and and.
And in relation to that Michael.
Michael just mention the backlog number which was certainly lower than I would've thought I'm sure. There's some type of that uhm could you speak to that as well.
Sir Deryck in and of course with a 7.9% billings growth for the quarter was it wasn't our top quarter in terms of field performance I think you notice that the second quarter. We did have a very strong billings grow we had a a very strong number of large deals that closed.
Setting a record the third quarter, a different mix of reps out there and as I noted half of our rafts in less than a year experience. We know that 18 months is the fulcrum point between those who are producing more than ever I versus those who are still getting their feet wet and learning the business. So I think.
This quarter, we wound up building a bunch of deals out there with folks that we're not necessarily the same proven players that were playing in the Oracle order you too they were playing in the essay P quarter of two three and we just didn't deliver all the deals we wanted millions of dollars of them slipped into.
The fourth quarter, which we have already closed billions of dollars of that business and we're seeing that we had some some other deals that were lost and we had some errors on the field that just were not just again rookie mistakes and other errors due to the fact, we didn't have enough management out there to oversee it and the <unk>.
Combination would be the hiring challenges I think all of that sort of just came together in the third quarter again, what a great logos lot of great wins, but we missed out on a bunch of bigger deals that we thought we were gonna get done in the third quarter and that's obviously affecting fourthquarter on the rateable basis and go forward into 22.
So we're continuing to work on the sales productivity will continue to work on the hiring to get those people, where they need to be but I think that's that coupled with a conservative guide for the fourth quarter is is probably why you're surprised that it's a little lower than express.
Okay and is it fair to say that I guess, you experienced higher sales, especially on the corner and any any any you know that's that's a tough I think.
Pardon.
Yeah part of the challenge I mean everyone's got this you know that'd be we've got the the great resignation as it's been referred to we haven't seen a lot of voluntary resignation, we've been pretty aggressive on turning over sellers that aren't productive I think we had a few more than we probably would have hoped.
And coupled with the new hires as you know bringing them in there's not much. They can do early on it takes a while to learn this business one of the unique challenges of this business is the complexity of the sale and that requires people to learn quite a bit of material the position and sell effectively.
And we need to get these people matured out, but we need to work through and as I mentioned, they're learning a lot along the way, but but there are errors being made on the on the battlefield.
I'll give you. An example, we just closed the second largest transaction in the company's history just last week.
Which was a fantastic transaction and it was done by sellers that have more than 18 months of experienced by a management team that had more than 18 months. So that's why I mentioned this lumpy we have areas, where we've got senior people and experienced that are doing very well, we have others will be gone a lot of rookies on the.
[noise] battlefield, and they're making some errors and mistakes that we wouldn't expect if we had a different more mature team on that but when you're doing hundreds of transactions now as part of the size broke we are that lumpiness is coming into effect, where you've got differences in the teeth. So I I do think that this was very particular too.
The third quarter the amount of new people, we have on the field that we have to train up and this is just part of the growth in some growth pain that we're gonna have along the way to $1 billion.
I guess my last one that I made that the the gross margin up tech so large and I think the Cogs was down a couple of million sequentially. Michael I think you mentioned that that was due to.
Less hiring <unk>.
Do you guys have enough capacity the service a pipeline or is that gonna require.
Onboarding people to be able to service new deals that maybe you don't have the capacity right now.
I'll I'll go ahead and take that one Derek I.
We absolutely have the capacity as I mentioned, we in the third quarter also hit the highest client satisfaction in our history north of 4.9%. The clients are very happy the clients of the the number of a S. L late and <unk> is not even in the lower percent uhm.
The best we've ever seen so from a scaling execution being able to service our clients no problem, but it's still it's really challenging to get all these hires gone for the growth.
Especially in the last couple of months, where we talk last last earnings call Weird feeling pretty good about hiring the last couple of months have just been an absolute storm for everybody. We've got probably 20 companies out there doing recruiting on top of our own Jean it's really tough.
And you know that it's hard to it's hard to grow when you can add all of the people you want it as quickly as you'd want and that's taken into our guidance as well, where you do have some impact and being able to get these people fielded in order to be able to deliver the size numbers and growth that we know is available based on the mark.
<unk> opportunity so for US again. This is there's some of this is hey, we're all in this together basically the same challenges. Some of this is purely our own execution getting people up to speed and and delivering consistent and versus lumpy execution and then I think when you look at gross margin we guided.
We just we just put 50 basis points on it because we see it growing but we're not guiding to that 65% because that was a little bit insulated by some of the hires that didn't happen in the third quarter, but when we put our guidance number together that's based on the assumption where.
Filling all of those position so you're not gonna see some change in cost structure. There. We're just going to fill out the positions that are available yeah. It was a little bit of a windfall for the third quarter, but we are guiding up 61, and a half two and a half Ah based on our our own leverage in that model not assuming that we're going.
Not fill positions.
Understood I'll see you before effects.
Thank you yeah.
Alright neck question.
Is fun cast danley with Craig Hallum go ahead Sir.
Sounds good. Thank you on the on the sales reps and and the challenge to get capacity a number of questions where did you in in terms of reps in the field at the end of the quarter and then too just in terms of the gross churn I know you've been making some pretty aggressive changes in the organization you Wanna Yoga Guy.
That are much more solution sale oriented.
We'll get the gross churn that you know of the sales reps was concentrated in particular geography or competitive arena name, one more reps like versus Oracle, a recipe or open.
Whatever focus area. They had an interesting question sorry.
Sure again thanks.
Question number one.
In terms of where we are with the sales reps. The term the churn is less than other industry folks by comparison, but it's a little high for us we're being pretty aggressive I would say North America, we probably have the biggest churn in and then you look at some Latin America, but there's a smaller number.
<unk>. So the percentage is meaningful the truth the truth bulk of of the change out of the sales team is North America and as you know we are laser focused on increasing the growth of North America. We've got it you know and that 4.8, yes, slightly better than last quarter in terms of a year over year round.
The new growth.
Our focus is you know I've I've said I wanted to try and get that I'd be really happy if we could get North America growing at 10% off by the end of the year on a run rate basis that would be great.
Challenging to get there and where we are but we'll see if we can and I think that there's no particular point.
About the the rafts there really is a geographic component then I think it makes up for it and I'm sorry, what was your first part of the question. You know if you know what you asked me to I forget one.
Well I was actually just the ending rough count and then very high end of insurance by G. L a product.
The ending I'd count was pretty similar to Q2 by the time you took out the attrition. We did have a good number of hires but as you know that gives you an even more rookie team out there so that the good and the bad is while you may have had similar numbers, what you're adding you too you got a bunch of rookies you added into the mix that are not even some of them are.
And even taking client calls yet.
They haven't even been certified to take a prospect call. So I think that part of course <unk> gives us some at a challenge in terms of execution, while we get those people up to speed I've actually been far more concerned with filling the management roles.
We took out the entire senior team, we had hired for Central you asked and I had alluded on the last couple of calls that that the central was just not doing nearly as well we've grown nicely we turned a real good corner in the east or the South had had quite a bit of a good success last year and turf that will be all.
Lord and we lost our G M. Because we took him out in the central we had another one retire for personal reasons from the west and we didn't really have enough management coverage to cover the hundreds of deals and transactions globally. So I really don't think it's a seller volume issue.
We've got the sales capacity, we got to go ahead and mature them with time, but not having the sales leadership is really top it's like building a sports team without enough coaches out there to get them, where they need to be in the game, especially as fierce a game as we fight every single day. So I think I would look to that sales management and the.
Announcements will be made the last few days for some significant hires that'd be put into position, but we're still missing some of the basic theaters that we need to drive those regions.
Yep Yep, presumably if the deal flow is there.
You just black seasoned sales reps room rates went down one right down uhm competitively again sort of a cross products and geography, no no real changes in wind right. Yeah respect I'm, assuming overall it was down yeah.
Yeah.
Think overall, but but it was skewed a little bit towards losing more on the F. A P side simply because Q3 is our big essay quarter because of these national way their contracts are written that customers have to give notice of termination on support changes by September 30th. So I think that really you know that's why it's dude I wouldn't be.
Read more into it I really think we just had more of a rookie team out there and not enough sales management, then and we just didn't execute as well and I think it just happened to be skewed that's a P. Because it was the people.
Yeah, if I could sleep take one last question yet insurance in respect to you don't color around.
Pipeline Grove and and.
Maybe in conjunction with that any application and 22, I know, you're not giving a formal to guide, but the trajectory of growth posted or at least that your guidance.
<unk> a substantially different trajectory that where the street has you. So you know we've got to put some revised numbers out there any hope there would be appreciated.
Appreciate it well.
Well I think you would give you some help in the modeling first of all we are guided to having become we'd have 100 heads. It was my target to have 100 sales had hired by the end of the year I think we're going to drop that to 90.
We're in the low eighties right now with a little more churn, we're close quarter, we're going to do a little more churn probably and then the AD. Yeah. You know I think if we end at 90 I'll feel good when I don't Wanna do is over pressured the leadership because we are limited on leaders, while we're still hiring more if I pressure them to spend 90 per se.
Out of their time doing hiring to make the hundred I don't think they're gonna get the time to focus on the deals that are on the table to clubs and I think it's a prudent move for us to just slept that back a little bit and 90 give them a little more breathing room in terms of being able to focus more on how to get out there and and get deals closed instead of being on the phone hiring all day.
A long so I think that that's a prudent switch a boob, but we're still going to hold the 120 had ending 2022 number in place I mean, it's got to do more hiring next year, but I think giving them a breather, let them spend a little more time working with the <unk>. We have now let's get their sales productivity back with.
Great productivity cute too we know we can deliver that we just didn't deliver it this last quarter, let's get these people all performing better get back to those higher performance numbers pipelines.
Pipelines gonna be lumpy in some regions again, you don't have leaders driving them yet so I think that we're gonna, we're gonna pay a bit of a price and the bumpy desk and some of that sales execution would just blow all the way down to the pipeline snow again keep in mind as you as you have been able to tell and every press release, we put out our commitment.
The billion dollar target.
Annualized revenue by the time, we get through 20th SEC is unwavering, we see no change to our long term picture Hey, along the way while you're building a billion dollar company. We got a couple of hiccups with hiring and Lumpiness sales execution, but we'll get there we're committed and we believe that still.
We will deliver that number by 26 22 is gonna be a little more muted I mean, that's pretty clear from the map you're going to wind up with with likely tamp down top line revenue number, but I think the message we were delivering in in the prepared remarks was hey, we may we may not deliver is high on the top.
Mine is all of US would like for 22 on the way to getting to $1 billion and maybe tamped down what we do a little more work done in the next few quarters to get the operation fully converted to 2 billion dollar operation model, but at the same time, we're going to deliver more on the on the muggeridge side and I. Thank you.
You can see you can look through a higher level of focus on delivering that part of it because we know if you're not going to deliver is high on the top line. We gotta give you guys leverage on the Investor side. So we're very aware of that and that's our commitment that we're going to make that app.
Great I appreciate it thank.
Thank you.
Sure.
Yeah K.
And next question.
Is from Brian Clint singer with a G. P. Go ahead. Please.
Oh, great Thanks close enough.
Given that lower buildings growth initiatives, the big X 80 quarter.
Now you've got a younger Salesforce, you said <unk> sounds in terms of revenue like three Q.
But.
My is it fair to think that first half living next year. So it's like the second half of the here you have a little bit of a Christian you've got a couple of wins, including one big one, but we should be waiting till the second half of next year before we start to see that we acceleration in revenue that how we should think about it.
Yeah, I think the way that we're thinking about it as you looked and reflected on it of course, we had did are close more demand two three what went right what went wrong a lot my wife, when you look at renewables Super strong, which is most of our revenue.
Excellent performance, they're excellent performance in the improvement in cross cells to the existing client base. All those things are going really well. It was logo acquisition that was weaker this third quarter in terms of where we wanted to be but all the rest of the operation including of course, where the business.
Of delivering service and our clients love the service and we're doing well by all the metrics. So I think this is this is really going to be all about focused on those rafts. I think you should see I mean, I'm, hoping we will see some some acceleration coming.
Coming in to even the first half next year, if we can get the sales performance, where we want it and that's why I dropped the head a little bit as I mentioned, we got a trade off a couple of things and I think taken off but just to offer a couple of breaths and let the the management team, which is still understaffed.
Get with our team work on their performance I think also one of the key things we're doing as as I mentioned earlier, but we have made a big deal out of it we're completely rebuilding our marketing operation New CMO search underway, we changed out the entire team just about we're changing from from an outbound marketing.
Into a kind of inbound marketing machine globally, it's a massive amount of change going on there too we're hoping that that in the next quarter or two will stabilize and we will start to see the fruits of that labor as well. So I had said on prior calls that I thought were about 70% the way through.
Our transition and reworking of the of all these departments and structures for billion dollar revenue operation. My guess is we're probably 75% to 80% now, but we still got a few quarters of work to do ahead of us to to complete all of it a lot.
Okay, one more for me that's it.
I'm sure you've been clear over the over quite a bit of time about your focus on accelerating the growth in North America, you'd hope to get 10% by the end of the year it seems unlikely given.
The billing and they're kind of in the sales staff.
<unk>.
For these new Rex.
In general can you get by how many new reps generally make it after a year what percentage and then at what point do you know.
And I guess that gets too can we get the 10% for all of next year or is that seem unreasonable at this point.
I'd go I'd hope they did some possible to get too I mean, we all know that the goal on any given quarters to do better than the prior quarter to show we have directional movement in the right direction.
And that we're improving.
I said I'd be really happy we got the 10, a we're gonna we're gonna we're gonna jump hoops just to see what we can do but of course, it's feel dependent it's wrapped dependent it's management, it's regional dependent there's a lot of pieces there uhm.
I think that no no nobody.
Nobody should necessarily give up on on that I'm not walking away from it as a cold, but yeah, you're right, it's going to be a really tough ride to try and make that happen.
In the fourth quarter alone, but I do want a direction, we should at least show improvement.
Thank you.
Sure.
<unk> K and with that we have no further questions.
<unk> turned the call back over to Mister says plain and for clothing remark.
Great well, thank you everybody and thank you for joining us as we head into the holidays. Please stay safe.
We look forward to getting a chance do to meet up with several of you on the analysts side when we send our analysts day, probably right. After earnings I. After we put out the K for next year very excited about that having our first in person meeting with analysts quite a while.
We look forward to a good day together will be working with you on the calendar dates we know it's a busy time with a lot of other events and looking forward to spending the time with all so please be safe have a great holiday and we look forward to talking to you in the next earnings call. Thank you very much everyone.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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